With the term coming to an end, data missing, and political pressure, the outlook for Federal Reserve policy is unclear. Powell stated that the weakness in the labor market is the main basis for this round of interest rate cuts

According to the Zhitong Finance APP, the Federal Reserve announced on Wednesday a further interest rate cut of 25 basis points, marking the second consecutive rate cut following the first reduction of 25 basis points at the September meeting. However, with the U.S. government shutdown limiting the supply of key economic data, and Chairman Powell's term nearing its end with successor candidates still undecided, the future policy path is becoming increasingly difficult to predict.

The Federal Open Market Committee (FOMC) stated that this decision aims to maintain stable prices while preventing further weakening of the labor market. In addition to the rate cut, policymakers also announced that they would stop reducing the size of the Federal Reserve's securities balance sheet starting December 1.

Powell explained at the press conference that despite inflation remaining relatively high and consumer confidence continuing to decline, recent signs indicate that the job market is cooling down, which has become an important driver for this decision to shift towards further easing. He emphasized that the labor market "appears to be gently cooling," while inflation remains "in a relatively high range."

This October meeting coincided with ongoing pressure from the White House on Powell to implement more aggressive rate cuts. The latest round of public criticism came from President Trump during his visit to Asia, where he accused Powell of "always acting too slowly" and openly suggested that Powell would leave office after his term ends in May next year, stating, "He will be gone in a few months."

The uncertainty surrounding the future policy path is sharply increasing. Powell stated after the meeting that there are "clear divisions" within the committee regarding whether to continue cutting rates in December, emphasizing that further rate cuts are "by no means a done deal," and monetary policy will not automatically proceed along a predetermined path.

During a media discussion with a Fed reporter, it was pointed out that this rate cut is the second action this year, while prior to July, the mainstream view within the Fed still considered the job market strong, with the main risks still lying in inflation. However, since entering the third quarter, corporate hiring has noticeably slowed, and while inflation data remains above target, there are signs of gradual decline. This provides a policy window for the Fed to implement consecutive rate cuts, indicating a subtle shift in policy focus from "inflation control" to "employment stabilization."

Another significant background influencing the decision is the ongoing U.S. government shutdown. Although the Fed itself does not rely on congressional appropriations, its policy judgments heavily depend on data provided by government agencies such as the Bureau of Labor Statistics and the Bureau of Economic Analysis, whose employees have been forced to stop working, leading to delays or even omissions in the release of key economic indicators. Reporter Amara Omeokwe pointed out that in the absence of official data, the Fed can only rely more on alternative indicators of consumer confidence, industrial activity, and employment-related metrics released by the private sector; however, these indicators lack the coverage and consistency of official statistics, posing a risk of "limited visibility" in policy-making.

In the context of the government shutdown, the official data available to the Fed is almost limited to the recently released September CPI. This data was allowed to be prioritized for release, but was delayed from the original schedule. Excluding food and energy, the core CPI rose 0.2% month-on-month, lower than market and economist expectations, supporting some officials' view that "inflation is moving in the right direction." However, there remains caution within the Fed regarding this reading. Analysts pointed out that the significant decline in rents may have a one-time component, and some imported goods are still reflecting the effects of tariffs, with categories such as furniture and clothing still showing price pressures Overall, U.S. inflation remains around 3%, significantly higher than the Federal Reserve's 2% target, which means that "inflation is easing but still not meeting the target" will continue to be one of the core premises of policy path debates.

Looking ahead to the December meeting, if the labor market continues to weaken significantly while inflation remains stable and does not worsen further, the Federal Reserve may face greater pressure to continue cutting interest rates; conversely, if the labor market stabilizes and inflation stagnates at a high level, the camp favoring a pause in rate cuts may regain the upper hand. Due to the impact of the government shutdown, if CPI and labor data cannot be released as scheduled in the coming weeks, policy discussions will face an environment of "making decisions in a data vacuum," significantly increasing complexity and risk.

In addition to the policy disagreements themselves, the nearing end of Jerome Powell's term has also become an important variable affecting the policy power structure. According to current arrangements, Powell's term will end in May 2026, and after this month's meeting, only four FOMC meetings will be held during his tenure. The Trump administration has made it clear that it plans to identify a successor before Powell's term ends, which means that in the coming months, the market may shift its attention to the policy inclinations of the "next chair." If the new chair's candidate is announced in advance, their public statements and policy preferences may intervene in the formation of expectations while Powell is still in office, creating an essential "shadow chair effect" that undermines the current chair's authority.

The selection process led by Treasury Secretary Janet Yellen has now entered a concrete stage. The list shows that five core candidates are under consideration: current Federal Reserve Board members Christopher Waller and Michelle Bowman, former Fed governor Kevin Walsh, White House National Economic Council Director Kevin Hassett, and BlackRock executive Rick Rieder. This combination covers current Fed officials, former officials, core members of the executive system, and market representatives, and is viewed by the outside world as a "mixed list" that balances political and market signal management.

From the structure of the list, some candidates are highly aligned with Trump's stance; for example, Hassett, as the chair of the White House National Economic Council, is one of Trump's core economic advisors; Walsh has previously been almost in sync with Trump in criticizing the Fed and is a clear advocate for low interest rates. If he takes office, the market generally expects a strengthening of monetary easing tendencies. Bowman, coming from the banking system, has long maintained alignment with Trump's camp on regulatory issues and expressed support for rate cuts earlier this year, seen as a middle-ground candidate with "partially aligned policy direction but independent technical stance."

In contrast, Walsh is viewed as the candidate with the most "independent central bank temperament" on the list. Although he was nominated to the Fed by Trump, his recent support for rate cuts is believed to stem from independent analysis of labor market data rather than political motivations. His push for regional Fed budget cuts and personnel restructuring during his tenure as a governor also shows that he is not merely a status quo maintainer but possesses the capability and preference for executing reforms. If Walsh is ultimately chosen, the market is generally expected to view him as a reassuring signal for the Fed's independence and professionalism, thereby stabilizing policy expectation fluctuations caused by the "shadow chair."

The uncertainty of the policy path is further compounded by a more institutional risk factor, as the judicial boundaries of the Fed's independence are being retested. The Trump administration previously attempted to remove Fed governor Cook from office on the grounds of an allegation involving mortgage fraud before the case was resolved, which is currently being heard by the Supreme Court The Supreme Court previously rejected an emergency motion allowing the president to replace Cook before the lawsuit is concluded, but has agreed to hold a formal hearing in January next year. The outside world generally believes that this ruling will become a key point in determining whether the independence of the U.S. central bank will be compromised.

For a long time, the difficulty in dismissing Federal Reserve officials has been seen as a core institutional safeguard against political interference in monetary policy. If the Supreme Court ultimately rules that the president can dismiss Federal Reserve governors during an ongoing case, this safeguard will be weakened, meaning that executive power could directly intervene in the monetary policy hierarchy, potentially structurally reshaping the Fed's independence. Market participants warn that once this precedent is established, it would open a systemic window for future governments to pressure policies, which could even have medium- to long-term impacts on the global trust foundation of dollar assets.

Analysis indicates that the Federal Reserve's recent interest rate cut is not merely a continuation of the September decision, but a risk-hedging adjustment made under multiple factors, including enhanced signals of cooling employment, inflation still not meeting targets, weakened sources of policy data, and the approaching political pressure and power transition. There are already significant internal divisions within the committee regarding the future path, with some officials advocating for further preemptive rate cuts to prevent a "hard landing" in employment, while others emphasize that credibility in tightening policy should not be lost until inflation returns to the target range. In the context of a government shutdown causing data gaps to continue widening, the December meeting may make decisions in an "information insufficient" environment, significantly increasing the cost of misjudgment